4.1. Introduction
CHAPTER IV
FACTORS OF LOCATION
The relative advantage of one area over others and the combined production cost difference
q between the places@ the essence of any locational study.
The basic factor that determines the location of any manufacturing unit is the positive cost
benefit ratio. The preferences and relative advantages of a particular place over the others is
also guided by minimum production cost (Smith, 1981 ). In this chapter we shall focus on the
locational factors of rice milling industry, which is the largest one among all the agro
processing units. Some specific factors led to the concentration and growth of rice mills in
eastern part of Burdwan district especially in Burdwan urban centre and its surrounding
niral-urbari fringe areas (Figure 4:1 ). These factors, ·in general, were the availability of
sufficient agro-based raw materials like paddy, abundant supply of cheap labour, good
communication system, adequate supply of power and above all the availability of capital
from the local farming based entrepreneurs. If profit maximization is the chief objective of
the entrepreneur, automatically 'least cost' location will be preferred for industrial location.
These factors are discussed in detail in this chapter.
We have categorized the factors governing the location of a rice mill into two broad groups.
This was done purely for convenience and does not mean that these two groups are not
interrelated. These groups are: physical geographical factors and socio-economic factors
Let us first try to take a look back at the past and briefly examine the historical growth of the
industry. in Burdwan region before· discussing various factors govern_ing the location of rice
mills.
4.2. Past as a Key to Present?
Once developed on the ruins of age-old cottage industries, the rice milling industry gradually
started gaining economic and social significance during the last 4-5 decades. The agro-based
industries served as vehicles for providing rural employment, drawing excess labour out of
agriculture, contributing materially in solving problems of seasonal unemployment, provide
outlet for investment of local capital formed from agricultural surplus. These units serve as a
source of employment especially of the female workers and act as a special help to the marginal farmers as they could sell their marginal surplus produce at a fair price to the rice
mills. The other direct beneficiaries of the industry are the paddy merchants and brokers,
their agents and sub-agents for raw material as well as finished products, chira and muri
processing units, soap factories, fodder producing units and manufacturers and suppliers of
milling machinery and their different parts.
87
0 23°N
One Dot Represents one Rice Mill.:~.
10 20
Km 30
88°E
RICE MILLS :"··, BURDWAN DISTRICT, 2001 /
)
\' . ·. . . :
87°30'E
· ... ' ,.:>
.. ..-..·-
,. . .,· v
Source: Data collected from the office of Burdwan Town Rice Mill Owners Association.
- I
5.3
/
23°N
Figure. 4.1
88
PLATE 1: INDUSTRIAL SKYLINE OF A RURBAN AREA - THE
PERIPHERY OF BURDWAN CITY
PLATE 2: A BIRDS EYE VIEW OF A RICE MILL (MIXED TYPE) CHA TAL,
DRYER, BOILER, MACHINE ROOM
89
As production of paddy increased remarkably in the district, the age-old hand pounding
system of processing was found to be inadequate to cope with increased demands of a larger
population. Thus, a favourable situation was created for the growth of rice mills leading to an
increase in their number to 179 at the end of 1989 (Samanta, 1994) and to 268 in the year
1998 Of these mills, as many as 256 are operating now. The gradual increase in the number
of rice mills up to 1998 in the adjoining areas of Burdwan city as well as in the district
presupposes a high degree of profitability of the industry up to that period
The history of rice milling industry is diverse. The period between 1920 and 1938 should be
treated as landmark years in the history of the rice milling industry in the Burdwan region
The continued success of rice mills in Tollygunj-Chetla and Pandua-Mogra belts inspired the
bigjotdars and paddy merchants of Burdwan to establish rice mills of their own At that time
there was no official restriction on rice mills, no dearth of the supply of raw materials, and
labour and initial capital investment requirements for the industry was not of a very high
order. The years between 1938 and 1948 were the years of slight depression for the industry
and the factors that contributed to that were: (i) the war and its impact on the total economy,
(ii) restrictions on the import of machinery from abroad, and (iii) the delegation of the power
to control the necessities of life to the provincial government by the central government and
following that adoption of a number of regulatory measures by the provincial government of
Bengal on the maximum price of rice, its export to other states, its procurement and hoarding
etc.
Just after the independence of India, the government announced the 'decontrol of food
grains' policy. This new development led the new investors to enter into the rice milling
business, especially the sub-agents who were appointed earlier for procurement of paddy. As
against this, the existing rice mill owners in other areas started to confront some serious
problems. One of these problems was the cessation of paddy supply from East Bengal and
marketing of rice in that market due to the partition of Bengal. The other one was controlling
the movement of food grains into Calcutta and its industrial area etc These brought a lot of
insecurities as to the future of rice mills. In consequence, many mills in those areas were
closed. The paddy merchants of Burdwan who hitherto had been supplying paddy to the rice
mills of Tollygunj-Chetla belt were in search of a new market for their paddy. In the
meantime, some merchants of Burdwan like late Mr Atul Krishna Dutta who also had rice
mills in Tollygunj and Barrackpore area tried to shift their mills to different parts of the
90
district of Burdwan considering it a prospective place for the same. Mr. Dutta not only took
the initiative himself as an investor he also inspired many prospective businessman and big
landowners to enter into this business (Samanta, 1994). In the meantime, there occurred some
changes at the policy level of the governments, both of the centre and state. For example (i)
with effect from 1st January, 1953 the rice mills were required to sell only one-third of their
produce to government instead of their entire produce, (ii) inter-district and intra-district
cordons were lifted with effect from l st January, 1953, (iii) from October, 14th the levy
system of procurement covenng producers as well as rice mills was given up and the
procurement continued only on a voluntary basis, (iv) the West Bengal government
decontrolled rice in 1954 and Statutory Rationing was withdrawn throughout the state, effect
from l 01h July, 1954, (v) the ban on inter-state movement of rice was also withdrawn by the
government oflndia, (vi) the abolition of zamindari by passing the Zamindari Abolition Act
in 1954 and the Land Reforms policy of government; both central and state, had some impact
on the growth of rice mills
Due to the cumulative effects of these, the rice mills became free to a great extent from
restrictions imposed by the government except for obtaining a license from the District
controller of food and supplies. During this period, the jotdars and big landowners of the
region began to sell their land and mostly invested their capitals in rice mills. Though the
large market was lost due to partition of Bengal, the huge influx of refuges from East Bengal
created some extra demand in the local market. The age-old indigenous method of hand
pounding system failed to cope up with the growing demand. Again, the emphasis on
agriculture in the first five-year plan had some remarkable impact on the paddy production in
the district of Burdwan. Abundant supply of paddy, better prospect of profitability (compared
to other types of business and trade) absence of banking facilities in the rural areas for safe
custody of surplus funds of zamindars and jotdars also created the necessity for investment
in the rice mill industry. Due to the above circumstances, the number of rice mills in the
district increased to 87 at the end of 1960 (Chaudhury and Sen, 1973) and 112 in the year
1964 (The Statesman, 8th August, 1989). The important feature during this particular period
had been that the new mills were not localized in the Burdwan city proper but the adjoining
areas of the city as well as the different parts of the districts mainly in Seharabazar, Memari,
Saktigarh, Galsi, Gushkara and Mankar. Thus there was large scale dispersal of rice mills
within the district during the period. After 1964, another golden opportunity for the growth of
the rice mills in the district came when Calcutta and its industrial fringes were brought under
91
statutory rationing on January 5, 1965 and the movement of rice and paddy into Calcutta
Rationing areas was banned, which served as a deathblow for the rice mills of Tollygunj
Chetla belt The increase in the number of rice mills since 1964 has often been disturbed by
the changes in the Government policy regarding the procurement of paddy from farmers, free
movements of rice within the districts, and authority of the rice mills for direct milling of rice
from paddy. Not only that, there had been even years when many rice mills were closed
down and the mill-owners surrendered their licenses to the authority due to too much
government control. The food policy of the first and second United Front Government in
l967 and 1969 respectively could not pull out the rice mills of the district from the distress,
though in the Amending Act of 1968 of the Rice Mills Industries (Regulation) Act, 1958,
provisions were made for subsidies from the State and Central Governments for the
modernization of the rice mills. Clearly, the government played a significant role m rice
milling industry - whether in its localization or otherwise. As we will see later, the role of the
government has now shrunk to a minimum, and in an industry used to hating such control
surprisingly the impacts have not been very positive.
The period between 1964 and 1974 is considered to be the period of negative growth of the
rice mills in the district of Burdwan. There was, however, one redeeming feature as during
this period, many husking mills were established in interior parts of the district for processing
rice from paddy. To regulate and control the activities of the husking mills, the Government
imposed levy on them under Rice Milling Industry Regulation (West Bengal Second
Amendment) Ordinance, 197 4. But the Government Order imposing that levy was
challenged in the court of law and by a court order the same was repealed.
The period since 1977 may be called the golden era in the history of the nee mills in
Burdwan. In 1977, there was a change in the government of West Bengal and Left Front
came to power. The LFG deleted many of the irksome regulations and control of the rice
mills in the state As for example, the government lifted the cordoning system barring full
rationing areas of Calcutta, Durgapur and Asansol, imposed proportionate levy on the rice
mills, allowed the rice mills to procure paddy from elsewhere in the state and sell levy-free
rice at any place in the state with a prior permission from the Food and Supply Department.
There was also change in the Industrial Policy at the centre in 1977 giving importance to
small and cottage industries as an instrument of economic development. Advances by the
banks to the rice mills were brought under the purview of priority sector. Lending provisions
92
was also made for the supply of machinery from National Small Industries Corporation under
hire purchase system at a concession rate. The cumulative effect of these measures had been
the boosting up of the morale of rice mill owners, so much so that since 1977 even the closed
and abandoned mills of the study region as well as the district reopened the door and started
operating again. Since this period the trend of modernization of rice mills began to start
slowly. Due to modernization of rice mills, rice bran- an important by-product came into the
market helping to increase the profitability of the rice mils. Modernization also increased
input-output ratio, the production capacity of the rice mills and also helped in pulling out the
industry from its seasonal character. Machinery for the rice mills also started being produced
indigenously, thus making it available within the country. Other infrastructural facilities such
as power supply (though not sufficient), transport facilities also developed into the interior
rural areas. Industrial Policy Resolutions of 1980 and 1985, which broadened the definition
of small-scale sector by increasing the level of investment in plant and machinery to Rs 20
lakhs and Rs 35 Jakhs respectively as a criterion for Small Scale Industry (S.S.l) units
provided filling for the industry. All these factors encouraged many prospective investors
including many educated unemployed youths to enter into the arena of rice milling industry
and as a consequence the number of rice mills started to increase.
The growth of the rice mills in this period has been characterized by the two features: first,
though the number of rice mills increased in the district, their growth did not commensurate
with the rate of increase in the production of paddy. Whereas production of paddy increased
by three times, the number of mills increased by less than two times. Second, there has been
a change in the pattern of ownership of the rice mills in the district with its impacts on the
form and structure of organization.
The following section describes the various factors responsible for the location of rice mills
in Burdwan city and its surrounding areas.
4.3. Physical Geographical Factors
4.3.1. Availability of Land
Land is a prime requisite for any industrial establishment, whatever the process, technique or
volume of the raw material or the product. Rice mills are no exception to this requirement
Apart from availability, the quality of land (flat, undulating, or steep slope) also influences
the choice of location. The eastern part of Burdwan district is flat land, situated on the
northern bank of Damodar favouring the location of rice mills. This flat land itself has
encouraged the cultivation of paddy since time immemorial
93
PLATE 3: FULLY DRYER BASED MILL (NO USE OF CHATAL)
PLATE 4: ROAD TRANSPORT PLAYS A SIGNIFICANT ROLE IN RICE MILLING INDUSTRY
94
The cost of the land has undergone a number of abrupt increases in Burdwan and adjoining
areas. This riverine plain has been densely populated since ancient times but since the late
1970s, its population has grown by leaps and bounds leading to a great increase in land
values.
Rice mills equipped with modern machinery but still using sun-drying chatals requires a
minimum of 5 bighas of plain land or nearly 70,000 square feet for drying the paddy. In
addition, there is the need of land for an office building, at least three spacious store rooms or
warehouse one for rice-bran, one big machine-room and one boiler plant place, keeping place
for a chimney. The area of sun-drying yard is determined generally according to the
availability of other inputs like capital, manpower, machines and materials. One higha
( 14,400 square feet) of sun-drying yard can dry 60 quintals or six metric tons of boiled paddy
in summer, whereas the same land can dry only 36 to 40 quintals of boiled paddy in winter
Further, land is now required compulsorily (under the provision of the Factones Act of 19-18)
to construct living quarters of the employees and labourers. Fina~ly, above these average
requirements, the rice mills intend to acquire more adjacent land for their future expansion.
Our study reveals that most of the rice mills in Burdwan have seven bighas or more of plain
land In some cases, however, rice mills may have between 5 to 25 /Jighas of land. Examples
are Jessoria rice mill at Sadarghat road covering 15 bighas and Jagatberh rice mill occupying
25 bighas, whereas Bisalakshmi rice mill at Sadharghat is on only five bighas of land. The
land requirement, therefore, is related to the size of operation as well as to the level of
technology used in the processing. We shall come to the aspects of processing later on.
Constraints on land acquisition for rice milling include
• Conversion of agricultural land to industrial m the government records m the
periphery of Burdwan;
• The mutation (conversion of land's characteristics in government records) process
of the Land and Land Revenue Department of the Government of West Bengal
The process is a rigid one, often requiring a lot of time delaying the entire process
of setting up of a milL The legal formalities in this connection are also
cumbersome;
• Objection of local residents at the time of land acquisit:on for industrial uses. In
the case of rice mills, this is because mainly of pollution from the chimneys, noise
95
and the smell of boiling paddy. In fact a new law now ensures that polluting
industries such as rice mills are established away from residential localities;
• The high prices of land having road frontage, particularly near the city and
Burdwan-North area, have also affected milllocatior;
• Multiple cropping of agricultural land due to the extension of irrigation facilities
has led to the tremendous increase in the value of such land creating reluctance
among farmers to the sale of such land.
These constraints on the site selection are an important attribute of the locational analysis of
rice mills in Burdwan.
The high price and non-availability of land in densely populated old residential areas within
Burdwan (such as in Alamganj area, once the urban-industrial focus of the city), have
resulted in a tendency of rice mills to migrate from these populated areas of the old urban
core to the sparsely populated peripheral regions like Nandra, Bajepratappur and Talit etc.
4.3.2. Raw material
The second most important factor for the localization of industry is raw materiaL Commonly
the commodity, which is introduced as the main input of the industry for processing purposes
and is converted into a new product, is the raw materiaL The basic function of an industry is
to increase the value of raw material by processing and converting its form into finished
products. This form utility creation through transformation of raw material adds value to a
primary material and is the fundamental objective of any manufacturing. The quantum of
profit from this activity is based on the nature, quality, cost and availability of that raw
material at a desirable price (Smith, 1981 ).
For rice mills of Burdwan, the nature, quality and availability factors of paddy are important
However, these factors all combined together may not necessarily result in the growth of a
rice milL Further, these inputs do not always play the same role in the establishment of a rice
mill in all the places. There are many rice mills in Burdwan, which do not enjoy the facilities
of the presence of all these inputs simultaneously. This clea.riy establishes that the presence
of one or two of the inputs have played pivotal roles in locating these mills. In some cases,
for example, the availability of plenty of raw material has played a major role as illustrated
96
by the localization of rice mills at Galsi, Ausgram and Burdwan North areas. These locations
also enjoy good transportation facilities and power. Similarly, an improved transportation
system played a vital role for concentration of rice mills in our study region and Trans
Damodar area (Raina and Khandaghosh thanas). The rice mills situated within the Burdwan
municipality area depend mainly upon the availability of power supply, local markets and an
easy transport system. As stated above, there is no uniformity in respect of inputs exerting
influence on the localization of rice mills. Their relative importance varies according the area
where they have been localized.
The raw material of the rice milling industry is paddy, which is the mam crop of West
Bengal Burdwan district, is now producing 1. 53 crore metric tons (2.00 1) of paddy per year
Most of this paddy is produced in the eastern parts of the district throughout the year The
peak period of paddy production is November and December, which is the harvesting season
of aman paddy (khariff crop). April and May is the harvesting reason of bora paddy, and
August and September is the harvesting reason of aus paddy. Naturally, the constant flow of
paddy in the market throughout the year eliminates seasonal dependence, which was a special
feature of this industry even up to the 1970s. Improvements in the field of paddy production
in Burdwan district due to introduction of high yielding variety seeds and multiple cropping
systems have played a vital role in Burdwan region and also in the district. Nearness to the
raw material has reduced the cost of transportation has ensured a steady supply of raw
materials
Yet, local paddy supplies are supplemented by imports from nearby districts of West Bengal
and neighbouring states. This is due to the ever-increasing demands of the growing number
of rice mills, which have concentrated in and around Burdwan city.
Till 1985-'86, supply of paddy from other states such as Andhra Pradesh and Punjab was
being obtained to meet the requirements of the rice mills of Burdwan From 1990 this
practice has been abandoned due to the increased cost of transportation, increase in purchase
price of paddy in these states and some prohibitory and restrictive measures adopted by these
states It is evident, therefore, that availability of paddy as raw material is not a major
problem for the rice milling industry in the region. Though there is no problem of the
shortage of paddy supply there are however, other problems associated with it (see the
chapter IX, on problems of rice milling industry).
97
4.3.3. Climate
The effect of chmate on the growth of a particular industry cannot be ignored. It has direct
influence on certain industries like flour-milling industry, cotton textile industry, chemical
and oil refinery industry etc. and indirect influence in many others. The rice milling industry
in the district of Burdwan too is influenced by the climate. A few years back, this industry
was a seasonal one and during the rainy season the operation would remain suspended
absolutely. At present though the industry has been capable of eliminating the seasonality in
its operation by introducing newly innovated modern technology in this field. However, the
climate of Burdwan region favours three seasons paddy cultivation helping in the constant
supply of paddy in the rice mills. In spite of the introduction of modern machinery during
the rainy season, the milling work is hampered to a great extent as the sun drying of paddy
gets affected. As such, regular production of rice is disturbed due to the absence of proper
sunshine Not only that, the moisture content in both rice and bran also becomes higher as a
result, and the quality of both rice and bran deteriorates. The procurement of raw paddy also
gets affected due to the dislocation of transport in rural roads and floods in rivers. In winter
season, due to foggy weather and low temperature, the sun-drying process gets affected and
productivity becomes low. A steady supply of water is essential for steaming and boiling of
paddy and also for drinking and domestic purposes of the labourers. For this reason, most
rice mills have: their own ponds, wells and tube wells adjacent to or within the complex of the
mills During summer, ponds get dry and water level goes down to such an extent that the
tube wells also become dry. This problem is more acute in areas adjacent to agricultural
fields where there is widespread use of deep and shallow tube wells for irrigation purposes.
4.3.4. Water Resources
Availability of plenty of water is a pre-requisite for the rice milling industry. In rice mills, a
huge amount ofwater is required for filling the houze where raw paddy is soaked. This water
is lifted through mechanized pumps (submersibles 71 percent and shallow tube wells 29
percent). Water is also required for steaming of paddy and for smooth operation of the mill
Apart from the direct uses of water to the plant for drinking, drainage of industrial effiuent,
cooling of boiler e~ water is regarded as an ingredient of rice milling industry. In almost all ..
the rice mills of Buia-wan, drinking water is generally supplied by own tube wells or wells.
The rice mills of Burdwan city use the Banka nullah for the drainage of industrial effluents.
These problems are discussed in chapter IX.
98
4.3.5. Energy
Energy is an essential force in any industry whether it is big or small. Many industrial zones
in the world have sprung up purely on the basis of availability of power Three types of
power or energy sources are generally used in the industry- coal, petroleum and electricity
Though coal and petroleum play significant roles in setting large-scale industries, they have
hardly had any impact on the establishment of small scale and cottage industries of the
district Rice mills, being small scale ones, are also dependent on electricity as the source of
energy. In the early days of rice milling, paddy husk and firewood were the main sources of
energy With the passage of time, widespread economic and technological developments in
all spheres the entire complex of rice milling has changed. Rice mtlling industry has now
. adopted modern technological know how. Consequently, the old <:.nd obsolete operations
changed their character and accepted electricity replacing the husk and firewood as sources
of energy Though husk is still used for ignition of the boiler plants, electricity is now the
main energy source for driving machines and other purposes. The district of Burdwan is
more or less rich in electricity availability and 68 towns (including 20 urban outgrowth) and
little over 2, 000 villages in the district have been electrified (State Electricity Board, Key
Statistics of the District of Burdwan, 1987). Electricity is supplied from Damodar Valley
Corporation, Durgapur Projects Limited and National Grid System.
Currently, the state of West Bengal is experiencing a serious shortage of power supply. This
could not but affect the rice milling industry of the district Almost all 'the rice mills covered
by the present study expressed their grievances against the frequent disruption in the supply
of electricity, which has led to rice production being severely hampered Frequent power
failures affect the production, as at the time of load shedding, a large section of labourers
become idle and production remains suspended. The quality of rice and bran also becomes
degraded as both quality and output ratio of rice and bran depend greatly upon the moisture
content of the !boiled paddy. If the load shedding continues for over 6 hours the boiled paddy
is heaped, waiting further drying, the output diminishes to some extent. According to
majority of rice mill owners, the period between 15th February and 15th May is the best for
the rice mills in all respects. During this period, the moisture content of procured paddy is
comparatively low. The boiled paddy is dried quickly and the quality of both rice and bran
improves Unfortunately, during this period the power crises become acute due to the high
summer temperatures As a result, the milling operations may be suspended for up to 2 days
99
at a stretch. To alleviate this problem, the mill owners drew the attention of the authorities
both civil and electrical to this problem either individually or through their association. There
was, however, no result to their appeal. The prevailing situation compelled many rice mill
owners to adopt alternative measures such as investments in high-·powered diesel-driven
generator sets. This has proved to be costly one for a number of reasons - first of all, a good
amount of capital is blocked, and secondly, the recurring and maintenance costs of the
generator have been found to be three times more than the cost of electricity. The situation is
aggravated further due to the present political situation in the oil producing countries of the
Middle East and consequent supply shortage in India in respect of oil.
4.4. Socio-Economic Factors
4.4.1. Capital
The capital or investment is the basic requirement for the establishment of a manufacturing
unit The amount of financial investment discerns the magnitude or scale of the unit (Roy and
Mukherjee, 1995). The financial resources mobilized by a firm, remain committed to 2 types
of assets - the fixed assets representing the fixed capital and the current assets representing
the working capital. Another type of asset is known as investment, a surplus fund of a firm,
which cannot profitably use either for the acquisition of fixed assets or current assets. Instead
of being kept idle, this amount is invested in the stock and share of other companies
(Samanta, 1994).
The amount of capital that would be needed to be invested in the fixed assets depends upon a
number of factors. One such factor is the nature of the industry itself- whether the industry
has to produce costly products like automobiles, vehicles or it is marketing concern not a
manufacturing one. In the first case, huge amount of money investment is necessary but in
the second case, there will hardly need any investment in fixed assets. A second important
factor influencing investment in the fixed assets is the size of the firm. A large-scale unit
whether manufacturing or service enterprise, for obvious reasons requires huge investment in
fixed assets. A third factor is the technological process used in the production. If the
technology used in production is highly sophisticated, investment in fixed assets tends to be
high. Similarly, if the industry has future growth prospects, the individual firms in the
industry are started on a large scale to get the benefit of scale of production, experience
shows that firms engaged in marketing activities only requires lesser amount of investment in
fixed assets.
100
The analysis further reveals that the financial requirements for fixed or block capital in the
rice mills are mainly for meeting the need/requirements of (a) the acquisition of land; (b)
construction of buildings; (c) purchase and installation of plant and machinery; (d) furniture
and fixture; (e) purchase of vehicle; and (f) for proper replacement of plant and machinery
and vehicles which were worn out by depreciation and obsolescence etc.
The 18 rice mills, which have been taken as a sample in the present study, have had many
changes and the transformation of ownership. This might be due to the fact that the actual
transfer of ownership of many rice mills through sale occurs under severe economic distress
In case of transfer of ownership through succession, there is no question of making any
payment
The analysis of the data in the financial statements of the rice mills further reveals that the
most important item among the fixed assets is plant and machinery. Lower percentage of
investment for plant and machinery is found in cases of relatively newly established rice
mills. For examples, Bardhamaneshwar rice mill was started in 1986. In this mill, investment
in plant and machinery had been 23.5 per cent of the total investment in fixed assets. Another
example is Durgamata rice mill, Rathtala started in 1986 In this rice mill, the share of plant
and machinery in the total fixed assets had been 35.45 per cent. Jessoria rice mill at
Sadharghat started in 193 7 is another example. In this mill, 71. E7 per cent of the total
investment in fi~ed assets had been in favour ofplant and machinery.
Another important item of fixed assets in the rice milling industry aH:er plant and machinery
is the land and buildings The industry's average investment in the land and buildings had
been near about 30 per cent of the total fixed assets with the minimum of 0.2 per cent
(Sridhar rice mill, Saraitikar) and a maximum of about 59 per cer1t (Sri Shyam rice mill,
Alamganj) The sample survey reveals some interesting aspects regarding the share of land
and buildings. One such revelation is that when the building has been valued at cost of less
depreciation, the value of land in most cases remains undervalued. Secondly, none of the
surveyed rice mills did go for the revaluation of their land and building despite manifold
increase in the prices of the same. Thirdly, in the case of some of the old rice mills, the value
of building has come down to zero as a sequel of charging normal depreciation. But, despite
the fact that the buildings is in good condition and the normal operation process of the rice
101
mills is carried on in the same building, there has been no reval.uation of building for
accounting purposes. In this situation, the capital employed in these rice mills remains
unadjusted with its impact on Return on Investment (ROI). If the owners of these rice mills
would revalue their land and buildings at their current market price~, not only there would
have been correct measurement of capital employed but also a correct estimation of ROI as
an index of efficiency of their performances. But because of the tax hazards, the rice mills
did not go for it. Examples on the point are Jagatberh rice mill at Berh more started in 1929-
'30 and this mill is on 22 bighas of land with buildings situated on it
The position of newly established rice mills is quite different. The Durgamata rice mill at
Rathtala having 6 bighas of land and Bardhamaneshwar rice mill at Alamganj having about 7
bighas of land., both established in 1986, reported about 51 per cent and about 59 per cent
respectively oftheir total fixed asset investment under the head 'land and building' Further,
the higher percentage share of land and building in the total fixed as:,ets of the newly formed
rice mills has been due to increase in the costs of both land and building under the
inflationary spiral in India since 1970-'71.
Another common fixed assets in the rice mill is furniture and fixture. In fact, all the rice mills
have certain furniture and fixture. However, in the financial reports of rice mills, some mills
include them under fixed assets, others do not. The firm in the samples which did not report
any amount in respect of furniture and fixture as fixed asset item are Kshetranath rice mill,
S.ri Shyam rice mill, Bhubaneswar rice mill etc.
It is true that the rice mill in the Burdwan city as well as the district in most of the cases have
no sophisticated offices requiring the use of sophisticated furniture and fixture in arranging
their office layout. However, total omission of the same in the li~;t of fixed assets impairs
correct assessment of the fixed capital used in the operation of the rice mills.
The next important fixed asset in the industry is the vehicle All rice mills use motor vehicles
as their means of transport both for the acquisition of raw materials, that is raw paddy and
marketing of finished products that is rice. But the survey result reveals that all the rice mills
in the city do not have motor vehicles of their own. For instance out of the 18 sample firms
selected for the present study only 7 of them have motor vehicles of their own and these are
Bardhamaneswar rice mill, Shanti rice mill, Laxmishree rice mill, Bharatlaxmi rice mill at
102
Alamganj, Jessoria rice mill at Sankharipukur, Annapurna rice mill at Nababhat and
Durgamath rice mill at Rathtala. Taking the industry as a whole, out of the total investment in
fixed assets, the share of the motor vehicles as an item of fixed asset had been only about 4
per cent
The other fixed asset item of the rice mill in some cases is the investment in certain securities
such as National Savings Certificate, fixed deposits with banks etc. But it is very uncommon
feature
4.4.2. Labour
Like other industries the availability of labour is an essential pre-requisite for the location of
rice mills Our present study reveals/discloses that despite technological improvement, that
is, improvement of the machinery of the mills, the industry continues to be labour intensive.
The rice milling industry requires a good number of labour for its various activities such as
for loading and unloading of paddy and rice, for boiling of paddy at boiler plant, for drying
of boiled paddy at sun-drying yard and machine shramik and coolies. Our investigation
reveals an important feature that besides a few, most of the labourers required for a rice mill
are unskilled and semi skilled. Only machine shramik, boilerman, yard-conductor locally
called Math Babu or Math Sarkar and accountant are skilled or conversant/well-acquainted
with the procedure. The other labourers engaged in sun-drying yard or for loading and
unloading of paddy and rice and go-clown labourers used for clearance and replacement of
husk and bran are mostly unskilled or semi-skilled
Sources of unskilled labourers are mostly surplus landless agricultural labourers of the rural
urban fringe of Burdwan city and to some extent maximum number of immigrants from
Dumka district of Jharkhand, Ganjam district of Orissa, and Purulia of West Bengal.
Labourers also came from other districts of West Bengal, like North and South 24 Parganas,
Midnapore, Bankura, Birbhum. From within the home district labourers also came from
Katwa, Borsul, Guskara, Gotan etc. who are also landless people In some cases, though
some of them are landowners, but their individual share of land is so small and the
productivity of land is so low that they cannot earn their livelihood from that particular land
So those people were compelled to leave their own homeland. There is more discussion on
the original home ofworkers in chapter VI.
103
After questioning the rice mill owner, it is known that there is no problem of getting
unskilled labourers for the operation of the mill. As there is less job opportunities in rural
urban fringe area for unskilled labourer, these rice mills are the only absorbers of these
labourers. But in getting skilled machine-man repairing and maintenance staff often they face
some problems. Maximum number of labourers engaged in the rice mills varies between 30
and 80 depending on the size that is the capacity and the type of mechanization of the rice
mills. Further, when the numbers of permanent labourers are a few namely 2 to 10 per mill,
the number of mostly casual labourers are quite large varying between 18 to 70. The reasons
for the dominance of casual labourers are non-technical nature of thi~' task, benefits of daily
wage payment system or no work no pay system, easy replacement and predominance of
women labourers who are mostly needed at sun-drying yard who after maintaining their
household duties engage themselves in working for the rice mills to supplement their family
income. Gradually, however, the benefits of employing casual labourers are fading out, as the
casual labourers are to be given the same facilities to which a permanent worker is generally
entitled. Progressive mechanization has given a new meaning to the labour factor. At present
skill and experience are more important than number of labourers and a low wage scale.
4.4.3. Transport
Other conditions remaining equal, transport cost makes a huge dlifference in locational
advantage creation. Transportation system of a region may be compared with the arteries of
the bodies of an organism, as both systems help in the circul~tion of essential inputs and
outputs . .The hauling of bulky and· weight-losing raw material from the source to plant and
finished goods from plant to consumers involve huge amounts of charge Rice milling
industry, though principally a raw material based industry, depends largely upon an efficient
transportation system as both paddies as raw material and rice as fin1shed product are bulky
in nature. In fact, transportation had played the crucial role at the ,early stages of the rice
milling industry when the rice mills of Bengal were concentrated in Tollygunj-Chetla and
Pandua-Mogra area of Greater Calcutta region. Both railways and roadways and the facility
of Calcutta port and the Hooghly river played vital role for their concentration. Though rice
milling has now become virtually a raw material based industry, it was initially based on
transportation facilities, and the availability ofurban amenities like power and market
Burdwan regiOn offers excellent transport facilities. The city as well as the district of
Burdwan is welll-connected with other parts of the state and country through Eastern Railway
104
and the historic Grant Trunk Road passes through the heart of the district and runs from entry
at Debipur under Memari Police Station to Saktigarh, Burdwan city, Galsi, Panagarh,
Durgapur, Raniganj and Asansol (Figure 4.2). The total length of the railways tract in the
district would be only approximately 612 kilometres including metre gaugelines.
The total metalled road and un-metalled road in the district was about 3,060 and 1,940
kilometres respectively in the year 1997-'98 (District Statistical Handbook, Burdwan, 1998)
The total metalled road within the jurisdiction of Burdwan Municipality is 177 kilometres,
which is of reasonable quality. The length of total un-metalled road in the city is 45
kilometres (according to a 2001 data given by the Municipality).
The interesting feature, however, is that railways played an impo1ant role in providing
transport requirement of the industry up to 1985-'86, the time up to which the rice mill
owners use to bring some paddy from Andhra Pradesh and Punjab. The practice has been
abandoned since then and consequently the railway transport has lost much of its importance
Since 1985-'86, the roadway transportation has been playing the absolute role in the city as
well as the district in transporting both paddy and rice to and from the rice mills. Motor
trucks are mostly used for such purposes.
The other means of transport used for this purpose are bullock carts especially in the remote
villages owned by local farmers and paddy producers. These bullock carts are used for
convey paddy to the agents at the procur~ment points.. However, the use of this very
old/traditional vehicle is gradually declining because of their limited capacity and slowness
on the one hand and development of roads on the other
The tractors are now being used widely in the rural areas for the purpose, as the tractor can
ply through unmetalled and rough road and can carry a substantial quantity of paddy at a time
at a cheaper rate.
105
TRANSPORTNEnNORK BURDWAN CITY AND ADJOINING AREAS
== ======
sr57'E
Ra1lway
Meta lied Road
Unmetalled Roa·j
Foot Path
• Rail Stat1on
........
0 2 3 L_______j_---'~--'
IKm
87'47 E
B M M Source ased on Topographical Sheets No. 7315
and 7316 . Distnct Planntng Map Senes. Survey of India 2000 and
City Map supplied by Burdwan Municipality. 2000. Figure 4 2
106
Out of 18 surveyed rice mills selected as sample for the purpose of present study, owner of 7
mills stated that they have their own vehicles, and the rest/remaining had been using hired
trucks, An interesting revealation in respect of transport arrangement of the rice mills is that
the trucks that these mills hired and engaged for the transportation of paddy as raw material
and rice as finished products had actually been under their ownership but purchased and
registered with the transport authority not in their own names but in the names of their
relatives, This had the distinct advantage of siphoning off a part of profit of the rice mills as
the transportation expenses with the advantages of admissibility as an expense for the
purpose of taxation of business income, The mills particularly which are in rural areas
confront transportation problems mainly in rainy season, Because during this season.
unmetalled roads become muddy and virtually unusable not only by the trucks and tractors
and even by bullock carts,
4.4.4. Demand and Supply
Demand of a particular commodity determines the very existence or survival of the industry
Demand is, in reality, the reflection of market condition, Initially the demand of rice in the
eastern part as well as in the district and the state and supply of enormous quantity of paddy
in adjoining /surrounding region of Burdwan lead to the mushrooming of rice mills at the
Burdwan city and its surroundings,
Demand of rice determines the price and the increasing price due to high demand brings
higher rate of profit initially,
Demand of rice on the other hand, determines the magnitude of production, As production
increased, at the surveyed area, so the mills also expand, New mills also venture to establish
another mill,
4.4.5. Market
The general importance of access to the market as a factor affecting industrial location has
been recognized for a long time, Market reflects consumer's behaviour which entrepreneur
monitors carefully to plan production and investment in business concerns, A change in the
market demand may be the result of change in either one or a change in the combination of
factors,
107
There is a ready market for rice in the state and in eastern India, and this home demand is
sufficient enough to absorb the entire produce of the industry. In this respect, rice-milling
industry is fortunate enough as it does not require any special effort to create market demand
through advertisements or other means. A large, concentrated and relatively affluent body of
consumers found in Burdwan city and its surroundings. This large market is one of the
reasons for the relatively rapid growth of mills in and around the Burdwan urban area. This
aspect has been discussed in detail in chapter VI.
4.4.6. Government Control
Government control is at the same time an important factor of location and a problem. It is a
factor, because of some regulatory and restrictive provisions of the Government of West
Bengal, which curb the liberty of the rice mill owners to sell their produce at their own
discretion thus imposing a locational constraint indirectly. For example, the rice mill owners
were not allowed to sell their levy free rice to Greater Calcutta, Asansol and Durgapur which
were under Statutory Rationing Areas 1. This means that the biggest urban markets cannot be
exploited by the rice millers. Thus, government control has caused more problems for the
industry.
Further under the provision of Sec. 3 of the Essential Commodities Act., 1955 and under
section 3 of the West Bengal Rice Mills (control and levy) order, 1988, dated 9. 11.1988, the
rice mill owners are compulsorily to pay a levy to government. The amount of this levy is
now 50 per cent of their total production of rice and the rate·is far below the actual cost of
production.
The procurement price on levy rice to be paid by the government of West Bengal was Rs.
251.60 for common rice per quintal. But the rice mill owners had to purchase the paddy from
open market at much higher rates than those prescribed by the Government of West Bengal,
such as Rs 160 for common paddy per quintal. Realizing this difficulty faced by rice millers,
the procurement price on levy rice to be paid by the government has now been raised to Rs
827 for common rice per quintal, and at the same time the government has fixed a rate for
purchasing the raw paddy from farmers' cooperative for rice mill owner is Rs. 530 per
quintal.
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After paying the levy, the rest half of their production can be sold in the open market. Even
in this respect there is an indirect restriction from the government. The levy-free rice can now
be sold anywhere in West Bengal excepting in the Statutory Rationing Areas with a prior
permission of the District Controller of Food and Supplies. The market prices of rice are
generally at a much higher rate than the procurement prices fixed by the government. Thus
the rice mills of the Burdwan are unable to fully exploit the existing markets in the Calcutta
metropolis and other industrial towns and cities.
As the situation has begun to change during the last few years of economic liberalization in
Government of India's policy, it will be interesting to see how much effective control
actually remains on the industry in the not so distant future. With imported rice beginning to
flood !he markets of every nook and corner of India, what role the government plays is yet to
be fully appreciated
4.4. 7. Exemption of License
In a federal state, like India, each state government has its own tax policy. This creation of s
revenue base through industrial establishments played an important role in the five-year plan
in India The 'license raj' enshrined this way actually posed more difficulties for industrial
entrepreneurs than empowering them As present, licensing has been exempted to attract
industrialists for fresh investment in rice milling. This opportunity attracts entrepreneurs to
settle in the Burdwan city and now especially in the rural-urban fringe like Nandra, Kalna
gate, Saktigarh and Talit railway station where there is sufficient space for the establishment
of new rice mills in uncongested localities where space and pollution problem does not
impose severe locational constraints.
4.4.8. Management
The spectacular development and specialization of particular products in a single area
naturally develops a traditional skill and managerial ability among the local people (Roy and
Mukherjee, 1995). In our case of study, it has been observed that traditionally the rice milling
industry had been well managed by an indigenous cast of the dist~ict The caste bound
managerial skills of Ugrakhatriyas has been nearly wiped out and now the mills are owned
and operated by locals as well as, persons from other districts and states. However, the
industry is yet to employ professional managers with business degrees (except in the large
solvent plants which are capital intensive).
109
4.4.9. Factors of Agglomeration
The high degree of industrial development of a region as its necessary corollary exerts certain
amount of influence on the setting up of other industries (Roy and Mukherjee, 1995). The
agglomeration of rice mills in the older parts of Burdwan city especially in Alamganj, gives
certain advantages to the establishment of new mills as well as other units like rice mill
machinery manufacturing units, chemical supplier units etc. Among these advantages are
latest information, contemporary technology, sound administrative set up, easy access with
sister organizations and day to day direct contact with consumers are very important.
Though industria.! location in the private sector is ultimately determined by the entrepreneur,
it is always influenced by the trends of the contemporary locational pattern. The prime
objective of 'profit maximization' may not always influence the location decision entirely.
The industries, either private or government owned, always show the tendency to grow in the
region where sustained development is possible. This is a prime requisite for the ultimate
existence of any kind of industrial establishment.
4.4.1 0. Trade Unions
The Centre for Indian Trade Unions (CITU) has had a leading role in removing exploitation
of rice mill workers. The strong union presence helps to maintain good relation between rice
mill owners and workers, and to preserve a reasonably safe and healthy environment within
the mills. Thi.s factor is very important for the long run existence and smooth operation of a
rice mill, and the mill owners too have come to accept that fact.
4.4.11. Improved Technology
Technology of the rice milling industry is dynamic Improved techniques of beneficiation
have definite effects on location (Chaudhuri, 1975) The introduction of sheller-cum
polisher-cum-separator system in the rice mill, has been helped in generating interest to
establish new rice mills as this modern machinery increase the production manifold with
minimum number of workers and minimum time.
4.4.12. Size of Pilant
The size of the plant must also be regarded as an important factor to attain efficiency in
production. Size of plants has witnessed tremendous changes in most areas of production
110
(Jones and Darkenwald, 1986). Increase in size of rice mills has led to much greater
efficiency in assembling materials and production; the amount of raw paddy required to
produce rice has been reduced greatly. Increase in size through establishment of solvent plant
also promotes greater efficiency in distribution to markets and in general management of
business.
But, 'the fact remams that the optimum size is very large and th:.s limits the number of
signiftcant locations' (Estall and Buchanan, 1961, reprint on third revised edition 1977) The
aim of scientific location is to maximize efficiency by minimum cost Integration of
processes, and other units like solvent plant, may help to attain maximum efficiency
Integration of processes in a modern rice mill demands production on a very large scale, in
order that each separate unit of production is kept operating economically.
4.5. Summary
In this chapter we have discussed various physical geographical factors like availability of
land and raw material, climate, water resources, and energy etc. and socio-economic factors
like capital, labour, transport facility, demand and supply, market, government control,
exemption of license, management, agglomeration, trade unions, improved technology, and
size of plant, for the large-scale localization of rice mills in and around Burdwan city as well
as within the district. The problem of regional location of rice milling industry is not
basically diffierent from that in other industries, because the desired site is one at which costs
of production plus marketing costs will be at a minimum.
In Burdwan, the physical factors have certainly been highly favourable for the growth of
agro-processing industry. The first and foremost requirement for establishing a rice mill is
the flat open space, which was available in plenty in Burdwan region during the early days of
rice milling industry, enhancing rapid industrialization. The huge supply of raw paddy from
the home district as well as from other districts of West Bengal and neighbouring states
meets the demand of this industry. Without constant flow/supply of paddy this very industry
could not be survived smoothly. The climate of this region is favourable year round except
the three monsoon months. The summer temperature helps in rapid drying of wet boiled
paddy, thus reducing the partial energy cost for running the mill. Traditional suspensions of
milling operation during rainy season have now been overcome with the use of mechanical
dryer The supply of plenty of water has also been helped for thriving of this industry. The
111
availability of electricity (though insufficient) and constant supply of husk for running the
boiler favoured the mushrooming of rice mills in Burdwan region. The non-bengalies and
local huge land owners (once zamindars) invest huge capital for the establishment of rice
mills. The constant supply of unskilled and semi skilled labourer from the nearby villages as
well as contract labourer from mainly Purulia and other states like Bihar, Jharkhand, and
Orissa etc. help in continuing the milling operation in this region. The excellent road and
railway transport facilities favours in rapid hauling of raw paddy as well as finished rice
Most of all the demand for finished rice of this region from the home land as well as abroad
helps in further establishment of rice mills and also helps in growing interest of the miller to
invest more for increasing the production capacity of the existing rice mills. The government
regulates the rice milling industry time to time, sometimes inspiring the entry of fresher
(through exemption of license) and also sometimes create problem (by imposing 50 per cent
of total produced rice as levy at considerably lower price thw open market). The
agglomeration of rice mills in the Burdwan region attracts the entry of newer ones The
managerial skill of indigeneous rice millers and their adoption of improved technology and
the large size of existing rice mills attracts new investors. Lastly, the trade union (CITU)
have played important role in maintaining good relation between rice mill owners and
workers and also preserving the healthy and safe environment within the mills.
It must be admitted that raw paddy, demand, market, economic utilization of by-products,
availability of open space without locality have been the 5 major regional factors which
determine the geographical pattern of rice production. Among the 5 factors, the influence of
market is very vital. This is because at present, the rice milling industry of Burdwan has
begun to face from stiff competition with the good quality cheap rice coming from abroad
This situation hampers the demand of local medium-quality high-cost rice due to the
fluctuating raw paddy market. Many other circumstances, however, have influenced the
actual choice of location or have caused the nature of the optimum location to change over
the years.
It is indeed difficult to find the ideal location and if it exists at any point of time, it would not
remain the 'ideal' for long, given the continuous technical advance (Chaudhuri, 1975). The
best location of rice mills is a matter of compromise and depends on the particular conditions
at the time and place concerned, physical, technical, economic, social and politicaL In
Burdwan, a wonderful combination of physical and socio-economic factors has interacted to
112
give rise to the agro-processing industry, especially rice milling. How this industry will fare
in view of changing economic situation of India, especially the various economic reforms
that are opening up the Indian economy to foreign competition, is a matter of concern We
have discussed the current problems in chapter IX.
1 Calcutta and its industrial fringes were brought under Statutory Rationing on the 5th January, 1965 and
Statutory Rationing was introduced in the Asansol group of towns and Siliguri on 22.2.66 (vide A.K. Sen, Op cit, pp. 834-35)
113